How to apply lean principles

The first thing almost every would-be entrepreneur is advised to do is create a business plan, which invariably launches them on a journey that can be as frustrating as it is useless.

Business plans were common in the industrial age when entrepreneurs could gather data that helped them predict important information such as market size and the revenue and profit that could be expected for a product or service. In the digital age, with its myriad niches, many entrepreneurs don’t know for certain what their product should be and what its market size might be.

As most entrepreneurs will tell you, it’s difficult to determine the market for a product or service unless it matches an existing one, which means you’re just playing follow the market leader. Worse, if you’re planning to penetrate and dominate a market niche, there may be no leader to follow.

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Which is why many entrepreneurs, especially in technology although it is spreading outside that sphere, are adopting the Lean Startup model created by Eric Ries as an adaptation of the Toyota Production System. Lean thinking sees as waste all spending of any resources that do not create value for the customer.

Lean thinking in an entrepreneurial setting also encompasses the Customer Development model of Stanford University’s Steve Blank to acquire important market intelligence. This iterative process encourages entrepreneurs to develop a minimal viable product and test it among a sample of potential users, create a new version based on their feedback, and continue the process again and again until they have formed a very strong understanding of their typical clients’ needs.

The model is a concept that has primarily been confined to software development, but seen as difficult to institute elsewhere. Entrepreneurs or companies who have tried the model for ventures in other fields have had to experiment considerably to adapt it to their business models.

Now there is a guide to the Lean process for anyone who is starting, or reviewing a business or a new project, whether it is tech-related or not. Running Lean: Iterate from Plan A to a Plan That Works, (O’Reilly), by Ash Maurya, provides actionable guidance for applying Lean principles to a startup or a project.

Taking a customer-centered approach, it outlines a step-by-step process on how to form and execute on a project without spending time on a business plan containing a series of assumptions that may or may not reflect reality.

Of interest to planners of new ventures, or new lines of business, is Maurya’s one-page business model called a Lean Canvas. A type of metalevel business plan, this model homes in on nine essential data points in a business concept.

In essence, the Lean Canvas is a business-model hypothesis that must be continually tested in the real world to eliminate many of the risks involved in a startup, such as market (non) acceptance.

Anyone familiar with a business plan will recognize that this closely mirrors the structure of a business plan. However, a Lean Canvas is much quicker and avoids all the “proof” of assumptions required in a business plan. It is a high-level, concise look at the business concept, that is proven or disproven through continual testing with target customers.

Most importantly the Running Lean process forces entrepreneurs to concentrate on the business not the product, which is so common among entrepreneurs, or a customer centric approach instead of a product development one.

Tony Wanless, of Knowpreneur Consultants (knowpreneur.net), is a certified management consultant who helps knowledge based businesses with strategy, innovation and planning.

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